Banks felt 2009’s effects in 2010

Two New Mexico banks failed in 2010, Charter Bank, Santa Fe, and High Desert State Bank.

Other institutions, including First Community Bank, remained under federal regulatory orders to improve their capital reserve levels.

Charter was New Mexico’s fifth-largest bank. It was the state’s first bank failure since 1999. When the U.S. Office of Thrift Supervision placed it in receivership on Jan. 22 and sold its loans and deposits to Beal Financial Corp of Plano, Texas, Charter had $1.2 billion in assets and $851.5 million in deposits.

High Desert was seized and sold June 25 to First American Bank, Artesia. High Desert, which was located in Albuquerque, had $80.3 million in assets and $81 million in deposits at the time of its failure.

Federal regulators cited high levels of nonperforming loans and low capital reserves as reasons for the seizures and sales.

The failure of Charter, which was locally owned and New Mexico’s leading mortgage underwriter, spawned accusations of overzealous regulation from some New Mexico business leaders.

“This is as absolute a heinous crime as there is. They stole that bank, the government stole the bank from its rightful owners,” Realtor Peter Parnegg, CEO of Coldwell Banker Legacy, said at the time.

When it seized Charter, the OTS said the bank had high levels of loan delinquencies, particularly in construction loans for commercial and residential developments. The agency said nearly 20 percent of Charter’s outstanding construction loans were at least 30 days delinquent, and nearly 30 percent of its gross mortgage loans for land were at least 90 days delinquent.

Former Charter President and CEO Glenn Wertheim said the takeover was unjustified because the bank was “still showing very good profitability.”

The seizure and sale had ramifications. The parent company of the Bank of Albuquerque bought the rights to service $4.1 billion in loans from Beal. In the months between the takeover and Sept. 30, the new Charter Bank lost nearly $500 million in deposits, according to the Federal Deposit Insurance Corp.

Beal kept the Charter name and said it planned to keep the bank open as a retail bank.

First Community Bank struggles

Throughout the year, First Community Bank, the state’s third-largest, continued to lose money and tried to raise fresh capital to boost its reserves. In the third quarter, it lost $23.7 million, bringing its losses for the year to $101.2 million. As of Dec. 27, it had not raised the capital it needed, according to its President and CEO Pat Dee.

First Community, with $2.3 billion in assets, has been under federal regulatory orders since the summer of 2009. This year, the bank was declared “critically undercapitalized” by the Federal Reserve Bank, a move that gave First Community 90 days to raise more money and boost its reserves. The “critically undercapitalized” designation took effect at the end of September.

In July, the bank’s parent company, First State Bancorporation, made an unsuccessful bid to raise capital by trying to buy back $95.2 million in trust preferred stock at 15 cents on the dollar. In the summer, the NASDAQ stock exchange delisted First State’s stock. The shares are now sold over the counter.

In February, the FDIC ordered Sunrise Bank of Albuquerque to divest itself from its owner, Capitol Bancorp Limited. Sunrise, located in Downtown Albuquerque, has 14 employees and $79 million in assets.

Capitol Bancorp is a publicly-traded, $5.1 billion bank holding company based in Lansing, Mich., and Phoenix. In a March 19 news release, Capitol said it lost $195.2 million in 2009.

The Federal Reserve Bank entered into a written agreement in February with Peoples Bank of Lawrence, Kansas, which has six branches in New Mexico. The agreement called on Peoples “to strengthen credit risk management practices.”

Although the numbers for 2010 aren’t in yet, it is likely that New Mexico’s more than 50 commercial banks didn’t lend as much money as they did in previous years, especially if 2009 was an indication.

According to the FDIC, the state’s banks ended 2009 with nearly $1 billion less in loans on their books than they recorded at the end of 2008.

At the end of 2008, New Mexico’s banks had nearly $13.1 billion in loans on the books. By the end of 2009, that had decreased to $12.1 billion.

America’s largest credit union, Navy Federal Credit Union, opened a branch in Albuquerque in the fall. Navy, with $41.5 billion in assets, signed a seven-year lease for 4,992 square feet at 2600 San Pedro NE.

Wells Fargo Bank solidified its position as the state’s largest in terms of deposits. Wells saw its deposits increase by $900 million from June 30, 2009, to June 30, 2010. That boosted Wells’ market share of deposits in the state to 24.16 percent, from 21.16 percent.